The Palestine Liberation Organization has denied recent reports that the White House issued a notice threatening to cut all aid to the Palestinian Authority if it launches a renewed drive for recognition at the United Nations.

"This is absolutely not true," PLO representative to Washington Maen Rashid Areikat told The Cable this week. "We do not know what they are saying. It's unfounded."

According to numerous online sources, Palestine National Council political chairman Khaled Mesmar, an Obama administration envoy issued the threat during a recent visit to Ramallah, and Areikat's comments come just days after senior Palestinian negotiator Saeb Erekat announced that the Palestinian Authority plans to ask the U.N. General Assembly  to recognize Palestine as an observer state. Last year's bid for statehood membership was blocked by the United States, and the top foreign aid leaders in the House of Representatives issued a similar threat in August 2011. 

On Capitol Hill, the Palestinian Authority has faced increasing scrutiny since it sought U.N. recognition last September. House Foreign Relations Committee chairwoman Ileana Ros-Lehtinen (R-FL) has spearheaded congressional efforts to prevent federal budgetary allocations to the Palestinian Authority -- which have averaged nearly $600 million since Fiscal Year (FY) 2008 -- from being released, along with House Appropriations State and Foreign Ops subcommittee chairwoman Kay Granger (R-TX). In March, Ros-Lehtinen agreed to release $88.6 million of $147 million slated for Palestinian development aid in the West Bank and Gaza that Republican lawmakers had placed on hold in August 2011, but Secretary of State Hillary Clinton overruled the decision and notified Congress in April that the entire package would be disbursed.

"On the congressional level I think that what we are facing is a total ignorance and lack of understanding of the political dynamics and variables that are involved in U.S. assistance to the Palestinians," Areikat said in a short interview. "We are shocked to know that these members of Congress don't even have the minimum knowledge or understanding of Palestinian positions or the impact of U.S. assistance on improving the living, economic, and humanitarian positions of the Palestinian people. Resorting to this tool to try to influence Palestinian leaders into changing their political position is something that has proven in the past to be counterproductive, and it will not lead to a change in the Palestinian political position."

As Ros-Lehtinen continues to place holds on FY2012 funds, however, the Palestinian Authority is facing financial collapse. Saudi Arabia transferred $100 million in aid to the Palestinian Authority after Israel applied for a $100 million International Monetary Fund loan on its behalf and was refused, but the PA's budget deficit for the current year has already surpassed the $1 billion mark. Palestinian Prime Minister Salam Fayyad said Monday that the PA is unable to pay about 150,000 of its employees.

The House's stance on foreign aid to the Palestinians has drawn the attention and ire of Senate Foreign Relations Committee chairman John Kerry (D-MA).

"House Republicans want to cut off aid to the Palestinian Authority," he said during a speech at the U.S. Global Leadership Coalition's annual conference on Tuesday. "I can't imagine anything that would tumble the Middle East more rapidly into a radical tailspin."

Rep. Adam Smith (D-WA), a co-signatory of the Cohen-Yarmouth-Connolly letter, which stresses the importance of American leadership to resolve the Israeli-Palestinian conflict, agrees.

"No, I do not support cutting off funds to the Palestinian Authority," he said in an emailed statement Tuesday. "I oppose them unilaterally seeking statehood, the deal should be bilateral, but cutting them off would lead to more conflict not less."

Members of the House Committee on Foreign Affairs, meanwhile, worry increasingly about corruption within the Palestinian government, as a committee oversight hearing last week about the Palestinian Authority's "chronic kleptocracy" demonstrated.

"As a major political donor to the Palestinians, we need to be extremely concerned that our aid will be construed as support for a corrupt regime," House Foreign Relations Committee senior member Gary Ackerman (D-NY) said during the hearing. "If they unintentionally wind up enriching loathsome regime figures ... then we have a hard choice as our support for the people is outweighed by unintended, undesirable consequences of that flow."

Areikat dismissed the hearing as a politically motivated smear tactic.

"By holding these hearings all the time, the House Foreign Relations Committee is ignoring an important fundamental principle in the U.S. system, which is giving the other party the chance to present its case," he told The Cable. "They have been holding all these hearings on the Palestinian Authority while the Palestinian Authority and its representatives are absent, so it's only a charade. It's a politically motivated campaign that has nothing to do with transparency and accountability."